CFOs’ vision for the future is less government

by 8 November 2019

The AFR View, courtesy of the Australian Financial Review

By learning how to guide the direction of the business and how to lead by communicating the company story today’s CFOs will develop the skill set that can make them the CEOs of tomorrow.

The message from The Australian Financial Review CFO Live 2019 summit is that the role of the CFO of the future will focus on transforming companies to deal with the complex challenges – from big data to social licences and populist politics – confronting business.

The summit made it clear that what CFOs want from government is not cheap advice about the need for more investment, but for government to get out of the way and cut the red tape and over-regulation that make their jobs even harder.

Opening the summit, the nation’s CFO – Finance Minister Mathias Cormann – reassured the nation’s chief financial officers that the government’s fiscally responsible budget strategy has left consumers and businesses with more money in their pockets to spend and invest, to stimulate growth. This record clearly hasn’t impressed Cochlear chief executive Brent Cubis, who said the best way to encourage business to invest would have been for the government not to have given up on cutting Australia’s internationally uncompetitive 30 per cent company tax rate. His most damning statement, however, was that in hindsight CSL – one of our most internationally successful companies – ‘‘wouldn’t set up in Australia’’, to avoid the past decade’s reform-shy, anti-business political environment.

There was also little sympathy among CFOs for Treasurer Josh Frydenberg’s demand that business slash investment hurdle rates and give less back to shareholders, to kickstart the economy. Wesfarmers CFO Anthony Gianotti said that business could both invest and return capital to shareholders.

Investment decisions were based not just on cost of capital or a single fixed ROI number, but also on a range of complex, long-term risk factors, including political instability and regulatory complexity. And baking in lower interest rates into investment decisions would mostly inflate the prices of assets. Woodside CFO Sherry Duhe agreed that cutting red tape and providing certainty was the key factor in business and investors having the confidence to greenlight and finance major projects.

The summit heard that the forces reshaping the role of business are also reshaping the role of CFOs. Rather than simply filling the traditional role of overseeing company finances, CFOs’ control over the purse strings is allowing them to drive decision-making around companies’ social and environmental purpose. Andrew Porter, chair of Group of 100 and CFO of the Australian Foundation Investment Company, said that while CFOs still had to do their core work right, they also need to partner with others across the business to ensure companies operate in the sustainable way that investors and stakeholders expect.

PwC’s Matt Graham suggested CFOs will be at the forefront of ensuring that companies develop the systems needed to accurately measure and report on their social impact. Jessica Fries, head of the The Prince’s Accounting for Sustainability Project, agreed and said that the response to automated accounting should be to reimagine the role of CFOs and finance teams by using data to drive performance across companies around sustainability, and to also measure the value that operating sustainably adds to the business. This would put CFOs at the forefront of developing the business lens through which companies should view their social licence, according to Coca-Cola Amatil’s Alison Watkins.

The CFO of the future will be engaged across all aspects of the business and developing the corporate strategy. As Gina McNamara, CFO of SAP, put it, CFOs will no longer be known mostly for their technical skills and trying to get the numbers right, but for being able to use data to lead a company.

As enterprise leaders, said IAG’s CFO Nick Hawkins, they will use the data to understand the business and its customers, what needs to change and why, and to get people on board with the transformation process.

And ASX’s Gillian Larkins explained that CFOs who used to just read the company by the numbers will now be challenged to take a much bigger seat at the table. By stepping up to the leadership opportunities, CFOs will transform not only their present roles but their career paths. By learning how to guide the direction of the business and how to lead by communicating the company story today’s CFOs will develop the skill set that can make them the CEOs of tomorrow.

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